Menu

Long Term Care

WHO WILL PAY FOR LONG TERM CARE?

According to the Congressional Budget office, the U.S. will spend an estimated $393 billion in 2008 for long term care, not including unpaid services provided by family and friends.

Although nearly half of us will spend the last several years of our lives requiring custodial care, there is no good answer to the question, “How are we going to pay for this?” Unless you have enough assets to cover the costs out of pocket, which can mean a lot of assets for a married couple living in a high cost area, there are only two alternatives: Long Term Care Insurance or Medicaid.

A. The cost to stay at a long-term care facility or a nursing home is very high. In 2007, available data indicates the average cost of nursing home care in the U.S. was $76,460. In New York City, the average cost of nursing home care was $145,000. In San Francisco, $101,000.

Assuming a 4% inflation rate per year, a New York resident can face long term care costs of $332,000 a year in the year 2025. Two years of care will cost $664,000. Five years of care will cost $1,666,000.

A. Many older people and their children are surprised to find they have no personal insurance to cover the cost of long term care. In 2007, a national public opinion research poll sponsored by Genworth showed some 44 percent of Americans incorrectly believed that Medicare or their private health insurance would provide the funding for their long term care needs.

FACT: When you reach age 65 you can no longer purchase private health insurance as an individual but you become eligible for Medicare, a federally funded health insurance program.

Some people supplement their Medicare benefits through a supplemental health insurance program called Medigap. A variety of Medigap programs are available from private insurance companies.

Medicare and Medigap pay for hospital care, prescriptions and other medical costs. Neither pays for custodial care, i.e., long-term care in nursing homes. Medicare does pay for nursing home stays of up to 100 days if you enter the nursing home directly from a hospital, but this is primarily designed to provide post-surgical nursing, not custodial care.

If the only insurance you have is Medicare and Medigap, the cost of long-term care must be paid from your personal assets. The other option is for you to purchase Long Term Care Insurance.

FACT: Consumer survey: long term care

In 2007, a national public opinion research poll showed some 44 percent of Americans incorrectly believed that Medicare or their private insurance would provide the funding of their long term care needs. Source: Genworth

A.Long term care insurance policies pay for custodial care, usually in your own home or in a facility. These policies typically cover skilled nursing and othe services like therapy, personal care and homemaking. They often have a per day limit, and either a lifetime cap or a time limit. They can be indexed for inflation.

Long term care is expensive. But the price of not having long term care coverage may be even more expensive because, if you need care, you will either have to become a burden on some family member or spend down your assets paying for long term care to become eligible for Medicaid.

A. A person who has less than $2,000 in assets and income that is insufficient to pay the cost of long term care can apply for financial assistance from Medicaid to help pay for your long term care. If you have assets, you must spend those assets paying for your long term care. After these assets are depleted, you will be poor. Once you are poor, you can apply for financial assistance from Medicaid.

If for some reason you are not eligible for Medicaid, you and your family will continue to be responsible for finding the dollars needed to pay for long term care.

It is unpleasant to think about needing nursing home or home care when we get older. Even more unpleasant is the likelihood that we will have to sacrifice our life’s savings to pay for that care. Most unpleasant of all is the likelihood that, even so, we will run out of money.

There are ways to mitigate the effect of this on your life and the lives of your heirs. Find a lawyer who specializes in elder care and discuss your options.

Terri Schiavo was not an elderly person. Young people have crippling accidents every day of the week, and long-term care insurance premiums increase with age, so (within limits) the younger you are when you get it the cheaper it is.

A. A few states are designing long term care programs providing some type of credit against the cost of insurance premiums paid back to the policy holder This arrangement is called the Medicaid Partnership for Long Term care.